Lord Carter hopes to achieve ?an orderly transition? to a radically different procurement system for criminal legal aid. But it is far from clear that he will succeed, writes Philip Hoult

Now we know the ?direction of travel? ? as Lord Carter calls it ? for criminal legal aid.

In his first report, published last week, the government-appointed troubleshooter proposed a three-stage move to market-based reform. The first phase will see the hourly rate ditched in favour of fixed pricing for all criminal legal aid work, including that in police stations, magistrates? courts and Crown Courts.

There will then be a ?managed market?, where contracts for groups of police stations are awarded to fewer, larger firms or consortia. These practices, he insists, will benefit from economies of scale and enjoy greater profitability. Finally, there will be a move to ?managed price competition? between suppliers, but with safeguards to protect quality, coverage in rural areas and diversity.

Lord Carter?s report contains few figures to prove such a radically different system will work. However, it does predict that there could be approximately 450 contract areas, worth between ?100,000 and ?750,000.

In most parts of England and Wales, these contract areas will be split into smaller ?units?. Where there are suppliers with large capacity, this could mean as few as six units. In areas with limited capacity among individual suppliers, there may be ten or more. Larger suppliers can be expected to seek contracts in a number of areas.

The absence of figures leaves it unclear how many of the estimated 2,500 suppliers of criminal defence services will be left standing at the end. As Lord Carter admits, with great understatement, ?these proposals represent a significant departure from the current system?. Accordingly, he recommends that the reforms be introduced over three years to create ? by 2009 ? ?a steady-state market? (see below).

Whether this is enough time is disputed ? Legal Aid Practitioners Group director Richard Miller considers the timescale ?wholly unrealistic?. At least the Legal Services Commission?s (LSC) plan to introduce price competitive tendering in London by this autumn has been scrapped.

Lord Carter insists three years will allow for ?an orderly transition?. He also argues that his approach has a much greater number of controls and safeguards than the LSC?s original plan. But there are many who remain to be convinced his system will work, or that the transition will be anything like smooth. The Conservatives, for example, were quick to predict the ?death knell of small high street solicitor firms?.

Top City solicitor Guy Beringer, an adviser to Lord Carter, played down the impact. Broadly the same number of solicitors will be employed under the new regime, he suggested, but in a different way. The future of sole practitioners nevertheless looks bleak, with Lord Carter citing problems of continuity if they are ill or on holiday, their failure to earn sufficient income and their ageing profile.

The report promises that during phase one, ?support will be provided to help suppliers either restructure their business or consolidate?. This, Lord Carter says, will come from the Law Society, the LSC and others. He also suggests capacity-building funds should be made available. But where will they come from?

Speaking on Radio 4, Law Society President Kevin Martin said the Society ?still needed to be convinced that just reducing the supplier base is going to be the answer?. However, he added that ?if there are going to be sacrifices along the way? then a great deal of help and support is going to be needed over the transitional period?. The Society ?is going to be looking to government for a great deal of assistance?.

Many legal aid firms are already on a precarious financial footing, and the costs of a merger ? or series of mergers ? could be the final straw. Will their banks fund these transitional costs, particularly if the firms could be out of business by the time price competition begins in 2009?

The report also pre-supposes that larger firms will happily take on smaller practices as they build capacity. They could instead simply cherry-pick staff. This would leave the owners of smaller firms with the financial consequences of having too much office space, too many support staff, and IT and other systems no one wants. It is also unclear how firms that also handle civil and family publicly funded work, not to mention commercial and other private work, will react.

Those firms that survive the restructuring will not necessarily be out of the woods either. Indeed, there will be significant concern at the relatively short length of contracts on offer ? one to two years. A major issue in recent years has been the effect of uncertainty on firms? business planning.

At the launch of his report, Lord Carter said uncertainty is a fact of life for any business. True, but then most businesses do not provide services to a single purchaser. A crime specialist law firm will go out of business if it loses its contracts. The viability of a firm that does a mix of criminal and civil legal aid work could also be threatened if it misses out.

And, if contracts are for as little as 12 months, there is the issue of whether firms will take on trainees. Where will the next generation of legal aid lawyers come from?

The final report in the spring is expected to provide details of the support and ?consortia start-up help?, together with a breakdown of contract areas and prices. The timing and regional phasing of the transition will be set out. By then the question of how this will all link with civil and family legal aid should also have become clear.

Last October, Lord Carter suggested ?the shelves of Whitehall are full of dusty reviews which have been rapidly discarded because they did not have a practical solution and the support of key stakeholders?.

Only when he produces the final figures will the depth of support among solicitors become clear, and whether his proposals will succeed ? or be rejected outright.

Steady-state market in 2009

  • Integrated system for delivering defence services from police station to Crown Court
  • Large individual suppliers and consortia favoured
  • Contracts tendered on quality, capacity and price in final phase
  • Quality overseen by professional bodies
  • Contracts to cover groups of police stations and their associated magistrates? courts and Crown Court cases
  • Contracts to be competed for on one-to-two year basis, depending on stability of market
  • Preferred supplier approach to ensure quality
  • Payment for police station services by block grant
  • Magistrates? court cases paid by fixed fee per case determined as part of competition to award contracts
  • Contracts for police station work to require contractor to provide defence services for majority of Crown Court cases that come through their stations
  • Litigation and advocacy services in Crown Court paid through single graduated fee scheme determined as part of competition for police station contracts
  • Defence services in very high-cost cases paid under individual case contracts with single teams, which will have passed an enhanced quality test and be on a specialist panel
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